California

Gov. Warns of 'Armageddon Cuts'

He predicts financial disaster if Propositions 57 and 58 fail

FRESNO — Launching a bipartisan campaign for Propositions 57 and 58 with a town hall meeting at a ceramics packaging factory, Gov. Arnold Schwarzenegger warned of "Armageddon cuts" to the state budget if voters fail to pass the twin measures on the March ballot.

Proposition 57 provides for $15 billion in borrowing to cover the state's existing deficit and refinance the state's debt. Proposition 58 is a balanced-budget amendment to the state's Constitution. The two are linked. If either one fails to win a majority on March 2, both fail.

If the bond passes, "we are then out of the hole. We are then on the way to recovery," Schwarzenegger told an audience of 150 people inside the Duncan Ceramics plant. If it fails, "we will have to make drastic cuts, deep cuts. I call them Armageddon cuts. Cuts in services that we don't want to make, that would be devastating."

State Controller Steve Westly, a Democrat and Schwarzenegger's co-chairman in the campaign, went even further in his warnings, suggesting that failure of the measures could trigger a worldwide recession.

For The Record Los Angeles Times Friday January 23, 2004 Home Edition Main News Part A Page 2 National Desk 2 inches; 83 words Type of Material: Correction Schwarzenegger event -- An article in Wednesday's California section about Gov. Arnold Schwarzenegger's appearance at a factory in Fresno inaccurately described discussions between the governor's aides and Fresno TV stations about live coverage of the event. Schwarzenegger aides did not ask the stations to forgo live broadcasts of the event, as the article stated. The TV stations decided not to air the event live after Schwarzenegger aides imposed rules that prevented TV reporters from talking in the factory while the governor was speaking.

"We are the world's sixth-largest economy -- there is much more at stake here," Westly said. "I just want you to remember: We've seen world recessions when relatively small countries like Argentina or Thailand have not managed their fiscal situation. March 2 is going to be the most important vote many of you cast in your lifetime."

Schwarzenegger's warnings received some backing from Wall Street on Tuesday. Standard & Poor's said in a report that the state might not have enough money to pay its routine expenses in June if the $15-billion deficit bond did not pass and the state was unable to secure a backup bond that is on shaky legal ground.

Schwarzenegger has been publicly urging the passage of both measures since his Jan. 6 State of the State speech. But Tuesday represented the official kickoff of his campaign, "Californians for a Balanced Budget: Yes on 57 and 58."

The measures do not yet face organized opposition. The governor, in a deal negotiated with Assembly Democrats in December, persuaded the state Legislature to place both measures on the ballot.

State Treasurer Phil Angelides, who has been critical of the bond, made a Tuesday afternoon appearance at Fresno State that aides said had been scheduled without knowledge of Schwarzenegger's event.

At his event, Angelides said: "No one should be threatening the voters of this state with chaos or Armageddon." Instead of borrowing, Angelides said, taxes should be raised. But when asked if he was planning to campaign against the bond measure, Angelides said no.

Other leading Democrats have backed the bond. "In the interest of the state, in the interest of trying to cut down the deficit, it makes sense for us to support the bond," state Senate Democratic leader John Burton of San Francisco told a California Manufacturers and Technology Assn. conference Tuesday.

Over the weekend at its winter convention, the state Democratic Party declined to take a position on the bond.

Support from Democrats such as Burton and Westly is essential to the governor's campaign, which is billed as a bipartisan effort. Aides said his Tuesday appearance offers a template for upcoming Proposition 57 and 58 events.

Schwarzenegger and Westly will spend much of the next month on the road campaigning for the plan. In the campaign's final two weeks, plans call for Westly and Schwarzenegger to split up in order to cover more ground.

The next campaign event is scheduled to take place Thursday in the San Gabriel Valley. As the campaign goes on, other Democrats, including the outgoing Assembly speaker, Herb Wesson, and First Lady Maria Shriver are expected to make public appearances as well.

The campaign will probably launch TV advertisements in early February, an advisor said. Schwarzenegger spent much of his December fundraising time trying to retire debt from the recall campaign, so fundraising efforts for Proposition 57 and 58 have begun in earnest only within the last week. The governor has fundraising events scheduled for today in Sacramento and Thursday in Los Angeles.

Even though independent polls have shown Proposition 57 -- the bond measure -- with support from less than 40% of those surveyed, Schwarzenegger insisted that his private polling showed the measure with more backing. (Proposition 58 is ahead in the independent and private polls).

"I'm a positive guy," he said. "I know we can turn this state around again."

At least on Tuesday, however, the ballot measures inspired little of the excitement that Schwarzenegger triggered during the campaign.